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Analytical Procedures Exercise See chapter 4 for an example on how to approach this exercise Perform preliminary analytical procedures on these financial statements. Calculate comparative and common-size financial statements as well as relevant ratios. Identify the accounts that could me misstated. Write a short narrative explaining which accounts auditors should focus on, and why. Unaudited Financial Information Prior Year Forecast Current Year (Audited) (Unaudited) REVENUE AND EXPENSE: Sales (net) $ 9,000,000 $ 9,900,000 $ 9,720,000 Cost of goods sold $ 6,296,000 $ 6,926,000 $ 7,000,000 Gross margin $ 2,704,000 $ 2,974,000 $ 2,720,000 General expense $ 2,044,000 $ 2,000,000 $ 2,003,000 Depreciation $ 300,000 $ 334,000 $ 334,000 Operating income $ 360,000 $ 640,000 $ 383,000 Interest expense $ 60,000 $ 110,000 $ 75,000 Income taxes (40%) $ 120,000 $ 212,000 $ 123,200 Net income $ 180,000 $ 318,000 $ 184,800 ASSETS: Cash 700,000 $ 880,000 $ 577,800 Accounts receivable $ 400,000 $ 600,000 $ 1,000,000 Allowance doubtful accounts $ (40,000) $ (48,000) $ (77,000) Inventory $ 1,500,000 $ 1,500,000 $ 1,350,000 Total current assets $ 2,560,000 $ 2,932,000 $ 2,850,800 Fixed assets $ 3,000,000 $ 4,700,000 $ 4,500,000 Accum. depreciation $ (1,500,000 $ (1,834,000) $ (1,834,000) Total assets $ 4,060,000 $ 5,798,000 $ 5,516,800 LIABILITIES AND EQUITY: Accounts payable $ 450,000 $ 450,000 $ 330,000 Bank loans, 8% $ $ 1,750,000 $ 1,750,000 Accrued interest $ 60,000 $ 40,000 $ 40,000 Accruals and other $ 50,000 $ 60,000 $ 32,000 Total current liabilities $ 560,000 $ 2,300,000 $ 2,152,000 Long-term debt, 10% $ 600,000 $ 400,000 $ 400,000 Total liabilities 1,160,000 $ 2,700,000 $ 2,552,000 Capital stock $ 2,000,000 $ 2,000,000 $ 2.000.000 Help M albright Instructure.com 400,000 $ (40,000) $ 1,500,000 $ 2,560,000 $ 3,000,000 $ (1,500,000 $ 4,060,000 $ 600,000 $ (48,000) $ 1,500,000 $ 2,932,000 $ 4,700,000 $ (1,834,000) $ 5,798,000 $ 1,000,000 (77.000) 1,350,000 2,850,800 4,500,000 (1,834,000) 5,516,800 Accounts receivable Allowance doubtful accounts Inventory Total current assets Fixed assets $ Accum. depreciation $ Total assets $ LIABILITIES AND EQUITY: Accounts payable Bank loans, 8% Accrued interest Accruals and other Total current liabilities $ Long-term debt, 10% $ Total liabilities $ Capital stock Retained earnings $ Total liabilities and equitys Check $ 450,000 $ 60,000 $ 50,000 $ 560,000 $ 600,000 $ 1,160,000 $ 2,000,000 $ 900,000 $ 4,060,000 $ $ 450,000 $ 1,750,000 $ 40,000 $ 60,000 $ 2,300,000 $ 400,000 $ 2,700,000 2,000,000 $ 1,098,000 $ 5,798,000 $ $ 330,000 1,750,000 40,000 32,000 2,152,000 400,000 2,552,000 2,000,000 964,800 5,516,800 Chapter 4 analytical procedures problem (see attached file) MUST BE SUBMITTED IN EXCEL (12 points) Analytical Procedures Exercise See chapter 4 for an example on how to approach this exercise Perform preliminary analytical procedures on these financial statements. Calculate comparative and common-size financial statements as well as relevant ratios. Identify the accounts that could be misstated. Write a short narrative explaining which accounts auditors should focus on, and why